The Brazilian Superior Court of Justice (STJ) recently ruled a case involving an attempt to judicially enforce a mortgage over a residential property offered as collateral in a business transaction. Although the property – owned by one of the partners of the debtor company – had been given as collateral, it was subsequently deemed unenforceable, thereby frustrating the enforcement proceedings.
The central issue in the case was whether a property – used as the residence of the partner and their family – would lose its homestead protection when mortgaged to secure a corporate debt, thereby falling under the exception provided in Article 3, item V, of Law No. 8,009/90.
In its decision, the STJ established that: (i) the general rule of homestead exemption must prevail; (ii) the statutory exception requires conclusive proof that the funds obtained by the company directly benefitted the guarantor’s family unit; and (iii) the burden of proof lies with the creditor, who cannot presume such benefit solely on the basis of the partner’s corporate ties.
To mitigate the risks associated with transactions secured by real property owned by company partners, creditors are advised to observe the following precautions:
1. Confirm that the property is not used as a family residence, since properties deemed homesteads are generally exempt from judicial seizure , even if the guarantor owns additional real estate. If the property is used as a family dwelling, creditors are advised to avoid relying on it as collateral to prevent future legal risks.
2. If the use of such property is nonetheless pursued, creditors should gather strong and objective evidence demonstrating that the transaction directly benefitted the guarantor’s family unit, in order to overcome the homestead exemption and render the property subject to execution.
3. In addition to collecting such evidence, creditors may also request an express written declaration from the guarantor acknowledging that the funds obtained by the company directly benefitted their family. While such a declaration alone may be challenged in court, it may still reinforce the creditor’s position.
Given the inherent legal risks of accepting a partner’s property as collateral, creditors must proceed with care and due diligence. The STJ’s ruling highlights not only the need to verify the residential nature of the property, but also the importance of proving that the proceeds of the transaction directly benefitted the guarantor’s household. Collecting documentary evidence and obtaining formal acknowledgments from the partner, where the use of such property as collateral is contemplated, are prudent steps to strengthen the creditor’s legal standing and mitigate potential litigation risks.
